“These improvements in Vermont’s law may seem technical,” said Governor Shumlin,
“but taken as a whole they continue to advance Vermont’s standing as the ‘Gold Standard’
for domiciles and will provide greater flexibility and clarity going forward.”

The changes in the law
include the following:

Sponsored
Captives and Incorporated Cells – A couple of years ago Vermont
authorized protected cells in a sponsored captive company to be separately
incorporated.Users of the program
identified needed amendments to deal with current law requiring the sponsored
captive to become a party to the insurance policy/reinsurance agreement putting
its core capital at risk even though the incorporated cell is a legal entity in
its own right.The change now clarifies
that, subject to prior written approval of the sponsored captive and the
Commissioner of the Vermont Department of Financial Regulation, an incorporated
cell is entitled to enter into contracts and undertake obligations in its own
name and for its own account.

Separate Accounts – The
change now allows an association or pure captive to establish one or more
separate accounts within the captive, much like what is currently authorized
for life insurance companies in Vermont allowing the use of a separate account
for risks that impact some, but not all of the participants thus negating the
need to reorganize as a sponsored captive.

Branch Captives – The
new law authorizes branch captives to insure the same risks that are permitted
to be insured by other captives.It also
requires the appointment of a Vermont
principal representative as the designated link between the branch captive, the
parent and Vermont
regulators.

Special Purpose Financial Captives – Vermont
now allows special purpose financial captives to be treated similarly to other
captives by authorizing them to be consolidated under common ownership and
control for purposes of calculating premium taxes.It also officially changes the name to
Special Purpose Financial Insurers.

Reciprocals – Captives and risk retention groups currently
organized as reciprocals are, and always have been, held to the same
capitalization standards as any other form of captive insurer.As such, the limitations on a subscriber’s contingent
assessment liability – specifically the minimum contingent assessment liability
– provided for was deemed unnecessary and has been eliminated.

“We’re delighted to have
the continued support of the Governor and the Legislature in keeping pace with
the changes of the industry,” said Dan Towle, Vermont Director of Financial
Services.“The updates to our law give
strong testimony reaffirming the commitment to keep us in the leadership
position the captive insurance industry expects.”